Explosives Found in New York Cemetery; Rove to President Obama: How Dare You?; Hungary Bracing For More Toxic Mud

Aired October 11, 2010 - 17:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, HOST: Thanks very much, Brooke.

Happening now, Democrats take their "blame it on Bush" strategy to a new level. This hour, their new attacks on GOP heavyweights, like Karl Rove. Will it help them on election day or will it backfire?

Also, 33 trapped miners may finally see the light of day in just a matter of hours. They're preparing for the risky journey out, one by one, that could leave them sick, scared or worse.

And the Republican candidate for New York governor is denying that he hates gay people. Critics, though, are seizing on Carl Paladino's weekend remarks about homosexuality and whether it's a valid way of life.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

But we begin this hour with powerful explosives -- yes, found in, of all places, a cemetery in New York City. And it's raising lots of questions right now about who put it there and what they might have planned for those explosives.

Let's go right to our senior correspondent, Allan Chernoff.

He's working the story in New York -- Allan, what are we learning?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Wolf, a very bizarre story. Eight bricks of military grade explosives found in a very small cemetery in the East Village of Manhattan. This at Second Avenue and 2nd Street, apparently found in a plastic garbage bag -- eight bricks. They weigh about one and one quarter pound each. And this is very strange and the way that they were found, because, apparently, they were found by a volunteer yesterday, but they didn't call this into the police until today. Very strange stuff, as I said.

And these explosives, we should point out, were not wired -- not set to go off. So apparently, there was no imminent danger to anybody. The bomb squad did show up and the streets were closed off. But no buildings were evacuated.

Now, let's talk a little bit about that back story. I mentioned that they were actually found on the ground near the back of this cemetery yesterday by a volunteer. This cemetery is usually closed to the public. Well, the police did a little bit of digging and they found out that apparently this had been dug up last year, last May or June, by a cemetery worker there planting some bushes.

What exactly were they doing there?

Nobody actually knows. The police commissioner, though, said that there was a note nearby.

Let's have a listen.

(BEGIN VIDEO CLIP)

COMM. RAY KELLY, NEW YORK CITY POLICE: The explosives were initially discovered or dug up in May or June of 2009. Written on the sidewalk down the street here, apparently in chalk, is a statement that says: "I really hope one of you find this."

The significance of that statement, we're not certain.

(END VIDEO CLIP)

CHERNOFF: And to add to the mystery, there was yet another note found on a police car nearby -- a rambling note also saying, "We hope you find this." And it was signed, "Jesus Christ."

So there's still a lot of questions about exactly how those explosives were in that cemetery -- Wolf.

BLITZER: Allan Chernoff, thanks very much.

I'm sure Commissioner Kelly and his team will get to the bottom of this, hopefully soon.

Thank you.

Let's go to the Democrats' new line of attack against Republicans right now, only 22 days before America votes. The president and his party are targeting influential Republican figures with an accusation that the strategist, Karl Rove, is calling -- and I'm quoting him now -- "beyond the pale."

Let's bring in our White House correspondent, Dan Lothian.

He's working this story for us -- Dan, what's going on?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, you know, the president first rolled out this theme at an event in Maryland last week. Some critics may see this as a Hail Mary pass leading into the midterm elections. But the president and his fellow Democrats are trying to seize on a message that they believe will resonate with voters.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): President Obama lifts off from the White House for another political fundraiser. Destination -- Miami. But the cash haul is only part of the arsenal Democrats are using to try and win in the midterm elections.

(BEGIN VIDEO CLIP FROM YOUTUBE.COM/DNC AD)

UNIDENTIFIED MALE: Karl Rove, Ed Gillespie --

(END VIDEO CLIP)

LOTHIAN: This new TV ad from the Democratic National Committee, with its ominous "voters beware" voice, targets Republican heavyweights Karl Rove and Ed Gillespie, along with the U.S. Chamber of Commerce. It suggests they're taking secret money to influence the elections.

Rove fired back on Fox News Sunday.

(BEGIN VIDEO CLIP FROM "FOX NEWS SUNDAY," COURTESY FOX NEWS)

KARL ROVE: And they're tossing out these baseless charges.

(END VIDEO CLIP)

LOTHIAN: But this theme was pushed by the president himself at a Sunday rally in Philadelphia, when he went after Republican-leaning groups and the source of their campaign ad money.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It could be the oil industry. It could be the insurance industry. It could even be foreign-owned corporations. You don't know because they don't have to disclosure.

LOTHIAN: On CBS's "Face The Nation," White House senior adviser, David Axelrod, was asked for proof that the Chamber was putting foreign money into the campaign -- a charge the organization denies.

DAVID AXELROD, SENIOR WHITE HOUSE ADVISER: The fact is that the Chamber has asserted that, but they won't release any information about where their campaign money is coming from.

LOTHIAN: Foreign money influence has become the new target for Democrats, much like House Minority Leader John Boehner was recently in their crosshairs.

(BEGIN VIDEO CLIP FROM SEPTEMBER 8)

OBAMA: When Mr. Boehner was here.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP FROM SEPTEMBER 8)

OBAMA: But not to Mr. Boehner.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP FROM SEPTEMBER 8)

OBAMA: Mr. Boehner and the Republicans in Congress.

(END VIDEO CLIP)

LOTHIAN: A White House official said it's a way to draw a sharp contrast for voters.

But do those voters care about it, especially when there are so many deep concerns about the economy?

JOHN AVLON, CNN CONTRIBUTOR: Once you start fighting proxy wars with the Chamber of Commerce as the bad guy, I think you're off on a tangent for the vast majority of voters in the middle of America.

(END VIDEO TAPE)

LOTHIAN: Now, White House officials told me that this is a debate that Americans should care about because, again, he points out that it shows the difference between what Republicans are for and what Democrats are fighting against -- Wolf.

BLITZER: Dan, the president is in Florida right now, South Florida specifically. But he's not doing a major, big public rally for the Democratic candidate for Senate, Kendrick Meek. He's only meeting behind closed doors with fundraisers.

What's going on here?

LOTHIAN: That's right. I mean we tried to get at that particular question and we don't know why he is not holding any kind of large rally or event for him.

I can tell you that when the president landed in Miami this afternoon, that Kendrick Meek was there at the airport. He did greet the president. And earlier this year, back in August, there was a time -- an off the record session where the president did go to a deli with him. And they held a small private event. And then back in April, there was also a DNC-sponsored event where Meek was in attendance.

But beyond that, we don't know why there isn't a big rally. No comment on that from the White House -- Wolf.

BLITZER: All right. If you get something on that, I'm very, very curious, because it looks like a real snub at the Democratic candidate in Florida, Kendrick Meek, who's been a loyal Democrat -- a member of Congress. The president comes to his home state in the midst of this three-way race there, with Charlie Crist and Marco Rubio. And the president doesn't do a major event -- public event, with TV cameras there. It looks like something is going on. I wonder what it is.

But if you get something on that, let -- let us know.

LOTHIAN: OK. BLITZER: I want to discuss this with James Carville and Ed Rollins later, as well.

We're also taking a closer look at campaign ad spending in these, the final critical days before the election; specifically, the outside groups that aren't required to reveal who they are and how much they're paying to influence your vote.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right. And we just heard Dan Lothian's report about the White House attacking Karl Rove and his group, American Crossroads. But that is hardly, hardly the only group spending all of this money, millions of dollars, to attack candidates. Both sides are doing it. It's just that Republican groups have the enthusiasm this year, and along with that, the cash -- anonymous cash.

(BEGIN VIDEOTAPE)

REP. RICK BOUCHER (D), VIRGINIA: We're doing far more than we've --

BASH (voice-over): Embattled 14-term Democrat, Rick Boucher, says he's never had an election enemy quite like the one he's facing now -- not his opponent --

BOUCHER: This is an organization that is truly shadowy.

BASH: A third party Republican group running this ad.

(BEGIN VIDEO CLIP FROM AMERICANS FOR JOB SECURITY POLITICAL AD)

UNIDENTIFIED FEMALE: Boucher has failed to protect our jobs. Now it's time Rick Boucher loses his. Americans for Jobs Security is responsible for the content of this advertising.

(END VIDEO CLIP)

BASH (on camera): Americans for Job Security is responsible.

You know who they are?

BOUCHER: We have no idea who these individuals are. And this could be a foreign entity. It could be someone who has a corporate identity in the United States. It could be a -- a very wealthy individual who has some grudge against me.

BASH: Americans for Job Security is one of those outside groups likely benefiting from a Supreme Court decision which, on free speech grounds, said corporations can spend unlimited money to promote or defeat candidates without disclosing donors. (voice-over): It does have this Web site, which says it promotes "free market ideas" and its more than 1,000 members are, quote, "businesses, business leaders and entrepreneurs from around the country," but also bluntly states it won't disclose donors because, "too often politicians or the media define an organization or message not by the merits of the argument, but rather by the perception of the people associated with it."

(on camera): Republican sources say Americans for Job Security only has one fulltime employee, Steve DeMaura, whose offices are right across the river from Washington here, in Alexandria, Virginia. Now, we've left multiple phone messages for DeMaura, to try to get more information about his group and we never heard back. So we came here to his office, knocked on the door and we were told he wasn't there.

DAVE LEVINTHAL, OPEN SECRETS/CENTER FOR RESPONSIVE POLITICS: Because of the type of group that they are, you don't know if that's one American for Job Security, a million Americans for Job Security.

BASH: What we do know, with the help of the nonpartisan, OpenSecrets.org, is Americans for Job Security has spent nearly $8 million against Democratic candidates nationwide, and, overall, conservative outside groups have already spent $108 million; liberal groups, $69 million.

Tim Phillips, with Americans for Prosperity, another GOP group, did talk to us. It's been singled out by the president.

(BEGIN VIDEO CLIP)

OBAMA: Even though they're posing as non-profit groups with names like Americans for Prosperity.

(END VIDEO CLIP)

BASH (on camera): By the time we reach election day, how much will your group have spent?

TIM PHILLIPS, AMERICANS FOR PROSPERITY: This year, we'll have spent around $35 million.

BASH (voice-over): That money funds ads like this.

(BEGIN VIDEO CLIP FROM AMERICANS FOR PROSPERITY POLITICAL AD)

UNIDENTIFIED MALE: Small businesses that see Marquis (ph) as the same as Nancy Pelosi.

(END VIDEO CLIP)

BASH: Who are its donors?

The Texas billionaire Koch brothers are the group's founders and give significant dollars.

Besides them, who knows? PHILLIPS: Most of it is private individuals. But we're glad to have their support and -- and we do tell them, look, we're going to protect your privacy, as the law allows us to do.

(END VIDEO TAPE)

BASH: And that's a key thing to remember. It is legal for these particular groups to spend tens of millions to affect elections, but without anyone knowing who's funding them. And consider this statistic from OpenSecrets.org. In nearly half of the most competitive Senate races, outside groups are spending more than the candidates themselves.

And, Wolf, today, we focus on Republican outside groups. Those of course, are the ones that the president is pointing his finger at, saying that they're really hurting the electoral process. But the truth is, Democrats do it, too. They have groups -- not as well- funded, but they do have groups out there. And we're going to bring you that story to you tomorrow.

BLITZER: And the Democrats, in 2008, had a lot of outside groups that -- that really helped get that -- that Democratic win in 2008.

BASH: They had a lot of money in 2008, both for the president's campaign, of course, to -- to members of Congress and all across the board. That is a big part of the -- the subplot here, that the enthusiasm gap is out there in a big way and that's affecting everything, including money.

BLITZER: Money talks in politics, as we all know.

We'll look forward to your report tomorrow.

Dana, thank you.

BASH: Thank you.

BLITZER: Small cities hit with a big corruption scandal -- why are so many officials in one area right now under arrest, in prison or on trial?

And a second flood of poisonous mud may be unavoidable. The environmental damage is being called a crime.

(COMMERCIAL BREAK)

BLITZER: Parts of Hungary are bracing right now for what could be a second gushing wave of deadly poisonous mud. CNN's Diana Magnay is on the ground for us with more -- Diana.

(BEGIN VIDEOTAPE)

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Emergency services say that an emergency dam that they're building to try to prevent a second flood of toxic mud is nearly complete and should be completed by the morning. Right now, there is a crack of the wall of the reservoir about a half a meter high and 20 meters wide, and authorities say they don't know when it may collapse, that wall may collapse, but they expect it to happen at some point. So that is why work on this emergency dam is so fast and so furious. There are 500,000 cubic meters of toxic mud still encased in the reservoir which, if the wall does break, might be unleashed again in a second flow on this village.

On Monday, also, an eighth body was discovered. There were seven already counted amongst the dead, an eighth body was found today bringing the death toll to eight.

The chief executive of aluminum company, MAL, whose reservoir it was that leaked the initial toxic spill has been arrested, part of the ongoing criminal investigation into who was responsible for this spill. He's currently in police custody and is being questioned.

And the prime minister added today that he will be taking MAL under state control on a temporary basis in order to safeguard the 1,100 jobs here in this region dependent on that company for work.

Diana Magnay, CNN, Devecser, Hungary.

(END VIDEOTAPE)

BLITZER: The military psychiatrist accused of gunning down dozens of people and killing 13 of them will be in a military courtroom tomorrow in Fort Hood, Texas. The hearing which will go on for weeks will determine if there's enough evidence for a court- martial of Major Nidal Hasan.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, the mood here, you know, we talked to probably about a dozen people today, and almost all of them told us they just want this to be over

One of the MPs on base told us nobody likes it when Hasan comes on base. He told us, we do our job, we protect him, but really we just want this man to go away.

We also spoke with the fiancee of one of the most seriously wounded soldiers in that attack. This was a young sergeant who had just come back from fighting in Iraq. He was just a couple days away from going to Officer Candidate School, that's why he was in that career center going through some of the processing when the shooting took place. He's been in the hospital for ten months trying to recover.

The fiancee told us, you know, because of what he's gone through, what other families are going through, there's an intense interest in what is going to be said at this hearing.

(BEGIN VIDEO CLIP)

JESSICA HANSEN, FIANCEE OF PATRICK HANSEN: We just want to be informed and for a lot of us means being present during the hearings and for some people that means not being present and just reading it in the newspaper, and for some people means not reading it at all, not seeing it at all.

But we all cope in different ways and I know in my situation, I just like to know all of the facts as I can get them. And for me, I'm anxious for the Article 32 to begin so the public can see start seeing some of the facts of what really happened that day and what led up to that day.

(END VIDEO CLIP)

LAWRENCE: Yes, for Hasan himself, he's being held in a county jail nearby. We're told that he has a Koran, he has a TV. He spends most of his day either sitting in a chair or on the bed and that his bathroom is a pail inside of that room -- Wolf.

BLITZER: What are we expecting to hear at this Article 32?

LAWRENCE: Wolf, we expect for the prosecutors to lay out the what. In other words, alleging that Hasan went out and bought these guns, that he practices aim at a local gun range and he carefully planned this attack.

What we probably won't hear is the why. Until this case moves to a full court-martial, prosecutors are probably not going to get to some of the areas of his motivations, his alleged ties to Islamic radicals.

Remember, just about a year before this attack, the FBI now admits they saw e-mails between Hasan and Anwar al-Awlaki, the cleric from Yemen, who has urged western Muslims to wage jihad. And we know that a Pentagon report found that the Army did miss some warning signs in Hasan's behavior -- Wolf.

BLITZER: Chris, there are dozens and dozens at the shooting. His defense attorney, how do they plan on dealing with that?

LAWRENCE: Yes, good question. OK, they're not going to try to prove that Hasan did not shoot at the base that day. You know, that's a pretty well-established fact. But what the attorney will look at is, you know, just what I sort of alluded to, that perhaps Hasan wasn't mentally stable. That he had exhibited some of the symptoms for months, even years going back. And that the Army and the military and federal officials missed these signals.

So you could see a scenario where as the government is trying Hasan, Hasan's attorney may be trying to put the government himself on trial, Wolf.

BLITZER: Chris Lawrence will be watching it for us in Fort Hood. Chris, thank you. We're monitoring other stories including a desperate hunt now underway for two suspects wanted in the disappearance of an American citizen who was jet skiing along the Texas-Mexico border.

BLITZER: Kate Bolduan is monitoring some of the other top stories in THE SITUATION ROOM right now, including some preparations for the dramatic rescue, Kate, of those 33 Chilean miners. It could happen very, very soon.

KATE BOLDUAN, CNN CORRESPONDENT: Very soon. It's such an amazing story and it gets more and more amazing every day.

The rescue of these 33 miners trapped thousands of feet underground could begin Wednesday or even sooner. Officials say tests of the hole through which the miners will be brought to the surface are coming back positive. And in preparation for the rescue, the miners will have to switch to a diet of liquids and vitamins. Each trip to the surface is expected to take 15 minutes. The miners have been trapped under the ground since August.

Mexican police, they are searching for two suspects in the case of an American citizen who disappeared along the U.S.-Mexico border. The wife of David Michael Hartley says her husband was shot and killed while he was jet skiing on September 30th and she's pleading for help in finding his body. The State Department says authorities from both countries are now conducting investigations.

And the first patient -- this is really interesting -- in an FDA- approved clinical trial has been injected with human embryonic stem cells. A spokesman for the company conducting the study says the cells were injected directly into the patient's spinal cord Friday. Scientists are trying to determine the safety of introducing these cells in humans. Only about 8 to 10 patients have been approved for the trial so far.

And former Vice President Dick Cheney, well he's worked for four presidents over the course of his long career, but he's not revealing his favorite. The former vice president was interviewed by his wife Lynn at a conference in California. Cheney says the reason why he's got to work for so many presidents is because he's never told anyone who his favorite was.

Do you have a favorite president, Wolf?

BLITZER: Yes, I've got a lot of favorite presidents. But interesting thing about Dick Cheney, you know, he was in the hospital for five weeks. I'm glad he's out and about. He's going to do some speaking over the next few months. He's got a book coming out, I think, next summer. I'm glad to see him out and about.

BOLDUAN: That man's career never ends. BLITZER: And we'd like to invite him to join us in THE SITUATION ROOM.

BOLDUAN: Come on in. We will get his favorite president out of him if it's the last thing we do.

BLITZER: We will. OK, thanks, Kate. Thanks very much.

He just won the Nobel prize for economics. So why are some Republicans, at least one United States senator holding up the nomination to join the Federal Reserve Board?

And some are calling it the corridor of corruption, 18 public officials in one area -- 18 -- accused of being gluttons for illegal payoffs.

(COMMERCIAL BREAK)

BLITZER: Here in THE SITUATION ROOM happening now, a British aid worker killed during a dramatic rescue mission in Afghanistan. Now it appears U.S. Special Forces may -- repeat -- may be to blame.

Also, the former President Bill Clinton hits the campaign trail. Is he a more effective tool for Democrats than President Obama?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

All right, they are small, working-class towns with more in common than just their borders. All of them now have been rocked by corruption at the highest levels. CNN's Casey Wian is covering this story for us in California -- Casey.

CASEY WIAN, CNN CORRESPONDENT: Wolf, eight officials in tiny Bell, California are awaiting trial for bilking the city out of hundreds of thousands of dollars a year in salary and benefits. As it turns out, they are not alone.

(BEGIN VIDEOTAPE)

WIAN: In the industrial corridor southeast of Los Angeles, sit five small cities, Vernon, Maywood, Bell, South Gate, and Lynnwood that form a question mark on a map. The question is, why are so many officials here either in prison, under investigation or arrest, or on trial for corruption? Most people now know about Bell, eight city leaders charged with dozens of counts of fraud.

HECTOR DE LA TOREE, CALIFORNIA STATE ASSEMBLY: It isn't just Bell. Bell were the gluttons at this trough. But there are other cities where folks are definitely eating at that same trough.

WIAN: Hector De La Torre, a state assemblyman first began his crusade against crooked politicians more than a decade ago in South Gate when he joined the city council. De La Torre can tell you about former South Gate treasury Albert Robles who is serving ten years in prison for taking bribe, money laundering, and corruption totaling $20 million. There's Paul Richards, the former mayor of neighboring Lynnwood. He's doing 15 years for corruption. Throw in Maywood and Vernon and we count at least 18 current or former officials in five neighboring cities implicated in recent corruption scandals.

What is it about these cities that attracts these type of officials that seem to want to prey on the public coffers.

DE LA TORRE: I think it's a combination of two things. One, these are all working class communities. The people are just trying to survive day-to-day. They don't show up at the meetings, they just trust that things are being done the right way.

WIAN: The long-time ally in political reform, former South Gate Mayor Henry Gonzalez survived after being shot in the head in his driveway in 1999.

HENRY GONZALEZ, SOUTH GATE CITY COUNCILMAN: I hit the ground, broke my glasses. I was in a mass of blood. I couldn't move. I was stunned.

WIAN: Police never solved the shooting. But Gonzalez now a city councilman points to a motive.

GONZALEZ: I was shot because I was trying to clean up city government. The corruption involved in our city was bad. We have a lot of people who are documented and undocumented. They're not very knowledgeable in city government so many give jobs at the minimum wage and they're working two jobs and don't have time to get informed.

WIAN: Gonzalez likes to point out South Gate is scandal free for now. His advice to residents of other cities?

GONZALEZ: Unite, find out what the city government is about, attend meetings, get involved. You'll have a clean government.

WIAN: That's been in short supply in these cities for years.

(END VIDEOTAPE)

WIAN: Citizens' groups have organized in Bell to demand more accountability from their city officials. But meanwhile, they're losing a significant ally in Sacramento. Delatori, the assembly member who represents that district has been lobbying trying to get the bills passed to reform some of the laws that allow the city officials to rip off the public. He's being turned out later this year. Wolf?

WOLF BLITZER, CNN ANCHOR: Casey Wian, thanks for that report.

It's not exactly a bulletin many Americans don't have a lot of trust in public officials right now. But they have a little bit more faith in one party over another in this -- just over three weeks until Election Day. Our senior political analyst Gloria Borger is here. She has new poll numbers for us. What story line are you seeing?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well Wolf, it just doesn't look very good for the Democrats as we head to the midterm elections. One thing we look at is will your policy move us in the right direction or the wrong direction. So we asked would Republican policies move the country right or wrong, of likely voters it's very important. Those are the people who are going to come out and vote. Time after time again on the economy, on terrorism, on Afghanistan, on ethics, you see that they believe the Republican Party is more likely to move you in the right direction -- immigration, taxes, spending, and even on health care, Wolf, which is Democrats spent nine months on, they believe the Republican Party is likely to move you in the right direction, immigration, taxes, spending and even on healthcare Wolf which the Democrats spent nine months on, they believe that the Republican Party is likely to move you in the right direction on that issue. It shows you that the likely voters, the passion is there for the Republican Party, not for the Democratic Party. In 2008, those numbers would have been flipped and it would have been for the Democrats.

BLITZER: We don't really care that much in these polls about registered voters because more than half, probably 60 percent or 70 percent of the registered voters won't show up and vote.

BORGER: That's what happens when you have a 40 percent turnout in a midterm election as opposed to a 60 percent turnout or so in a presidential election. These numbers really matter for the Democrats as they head out to the polls.

BLITZER: We're also seeing the new numbers no great love for either party.

BORGER: It's very clear the public is completely conflicted. As you look here, Congressional approval ratings. That's what we're voting on, right, in the fall. Republicans only 29 percent. Democrats only 32 percent. So I think in this election, Wolf, as a yes or no election. People aren't voting Democrats or Republicans, they're voting, yes, I like what's going on in Washington or, no, I don't like what's going on in Washington. And a lot of folks and the enthusiasm is there to vote no. The problem is -- say the Republicans take control of the house. They're going to have to deliver. The public is going to have to demand that they do something they like so they can be different. Or else, guess what? It's going to be an anti- incumbent Republican election next time around if they can't prove that they can get something done. So, yes or no. And they're voting no.

BLITZER: The key issue is we keep pointing out jobs, jobs, jobs. People want jobs. They want to see action. And they want to see it soon.

Another piece of the puzzle in an anti-gay hate crime that New York's mayor is calling sickening. (COMMERCIAL BREAK)

BLITZER: Kate's back. She's monitoring some of the other top stories in THE SITUATION ROOM right now including a development in what authorities are calling a brutal New York City hate crime. What do you have?

KATE BOLDUAN, CNN CORRESPONDENT: Brutal story. It is sure, Wolf. Officials say the final suspect in the anti-gay crime is expected to turn himself in tomorrow. Eight suspects were arraigned yesterday and police say the men held three victims in the Bronx against their will and beat and sodomized them. New York Mayor Michael Bloomberg says he's sickened by the attacks. The next court date is set for Thursday.

The other stories we've got here, Israeli Prime Minister Benjamin Netanyahu says he's willing to renew a moratorium on settlement construction in the west bank if Palestinians acknowledge Israel as a Jewish state. The controversial moratorium expired last month creating a potential stumbling block in the ongoing peace talks between the two sides. Palestinians have consistently rejected acknowledging Israel as a Jewish state.

This just in, tropical storm Paula, another tropical storm, has just form in the Caribbean. The National Hurricane Center says right now the storm is packing maximum sustained winds at 60 miles an hour. Hurricane warnings have been issued for parts of the Mexican Yucatan peninsula including Cancun and Cozumel. Tropical storms still in the middle of it. Wolf.

BLITZER: Hurricane season continues. We've been lucky. Hope it stays that way.

BOLDUAN: Knock on wood -- or Plexiglas.

BLITZER: Or whatever. Thank you.

He's considered an up and coming Republican candidate. Will a photo of him dressed as a Nazi drag him down? Stand by to hear his unusual explanation.

(COMMERCIAL BREAK)

BLITZER: Let's get to the strategy session. Joining us our two CNN political contributors, the Democratic strategist, James Carville and the Republican strategist, Ed Rollins. Quickly I just want your thoughts. James, I'll start with you. The president of the United States is in south Florida right now. He's holding a couple of fundraisers behind closed doors. Some print reporters inside. No TV cameras. Kendrick Meek, he's there, the Democratic Senate candidate. He's got a tough race against Marco Rubio and Charlie Crist. But I don't understand. Maybe I'm confused, James, why isn't the president doing a big public rally for the Democratic nominee for the United States Senate in Florida?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: In the interest of disclosure, I think I sent out something to help Kendrick Meek raise money. I'm a supporter of his. It may be and I don't know, it may be the kind of voters they're targeting the president isn't that powerful. Maybe they think Kendrick Meek would want that. I'm not sure that's the case. But one has to consider that's a possibility.

BLITZER: I had him on my show last week, Ed. And he bragged about the fact that the white house, the president, Bill Clinton coming down to campaign for him. I don't see that public campaigning for him on the part of the president of the United States. He is going to do some sort of radio ad for Kendrick Meek that they'll send out some voiceover. But do you understand what's going on here?

ED ROLLINS, REPUBLICAN STRATEGIST: No, I don't. I think it's a total misuse of the president. He was in Philadelphia yesterday. He didn't say a whole lot about the candidates there. The problem is that Meek is a Congressman, a member of the black caucus with a lot of credibility back home. He's going to spend the next two or three days explaining why the president wasn't doing more for him. I think at the end of the election cycle, there's another one to come in two years from now and a lot of members are going to say, the president needs to go over the cliff for us. We went over the cliff for him. I think it's a bad strategy. Wherever the president is, he ought to be campaigning for Democratic candidates, period.

BLITZER: Well that's why I'm surprised but maybe there's a better explanation. If the white house shares it, we'll let our viewers know. Let's move on to the Nobel Prize for economics. The American economists Peter Diamond got that prize today, James. But guess what? He's been nominated by President Obama to serve on the board of Federal Reserve. He's being held up. They're not even letting some Republicans Richard Shelby from the banking committee. They're holding up the confirmation process. Robert Gibbs saying today, "Despite being heralded by the Nobel committee for the ground breaking work, the nomination for the Federal Reserve board of governors continues to be held up by a partisan minority in the Senate, constructing a nominee as well qualified as Peter in a time of economic crisis is a harmful attempt to score political points." Go ahead and weigh in on what's going on here.

CARVILLE: I think the reason they said they wasn't qualified, I'm not sure how you score political points by denying appointment to the fed board, the fed just wants a Nobel Prize. I would be interested in hearing from Republicans from that. I think it's more just a case of out and out obstruction if the truth be known. And maybe the Nobel committee knew this and wanted to make him look ridiculous. Who knows?

BLITZER: He's a distinguished -- he's a distinguished professor. He's 70 years old. He's been teaching a lot of economists over the years, Ed. Go ahead.

ROLLINS: Including the chairman of the fed reserve. This is inside baseball. One senator can always hold up somebody. Senator Shelby had some concerns about the monetary policy. But someone else put a hold on it. I think at the end of the day, he'll be cleared. He's got a vote out of the committee in three Republicans join the majority of the Democrats to vote him out. My sense is that he'll be confirmed very quickly. Otherwise you're going to have an embarrassing situation here.

BLITZER: Speaking of embarrassing situations, Ed, I'll start with you on this one. Rick -- he's running for the United States Senate -- the United States Congress, House of Representatives from Ohio. And all of a sudden, it emerges that on weekends, he likes to dress up as a Nazi and go to these historical re-enactments if you will. He explained what he was doing to our own Brooke Baldwin earlier today on CNN. Let me play a little clip.

RICK IOTT: That was absolutely one of the low points I think in human history. And it's a tragedy that we don't want to forget, we can't sweep it under the rug.

BLITZER: Eric Cantor of the Republican leader and one of the Republican leaders in the house. And one of the other Republicans, they're walking away from this guy quickly right now. Do you understand what's going on?

ROLLINS: You know, for whatever reason, some men like to dress up in army uniforms. There's always a union-confederate battle. This guy wore union -- in a campaign, he's going to spend the next week explaining what he's doing in a Nazi uniform. At the end of the day, it has to distract from the campaign. Since it's not one of the top targeted races, it would make it difficult for him to win this thing.

BLITZER: James, go ahead. You've got a smile on your face.

CARVILLE: I heard he said he did it to bond with his son. My dad used to play catch with me in the front yard. Just kind of -- dressing up like Nazis. Somebody is going to find out who the other people are. My guess is, you know, we're going to find out some kind of peculiar people who do this. That's just my guess. I don't have the evidence. But I'm sure some enterprising reporter will look into it.

ROLLINS: James and I always question the candidates. In the future, we'll have to ask if they're witches, wear Nazi uniforms or what have you.

CARVILLE: I think it feels an S.S. uniform, wasn't just a mark uniform.

BLITZER: The more I cover politics, the stranger and stranger it gets. Thanks for coming in.

CNN gets some rare access inside North Korea for the unveiling of their new leader. Stand by for this incredible report from the heart of Pyongyang.

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BLITZER: Usually shrouded in secrecy, Communist North Korea has briefly pulled back the iron curtain to show off its new leader. CNN's Alina Cho got a rare invitation to witness the event and take you behind the scenes.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT: The most reclusive dictator in the world opens his arms and his doors to the world. An unofficial and elaborate coming-out party for Kim Jong-Un, the hermit nation's hidden prince, the son of Kim Jong-Il, who one day will become its leaders. This is the world's first glimpse of him in action after being named a four-star general last month. Just after touching down, we're whisked to Pyongyang's mayday stadium for the first event. The mass games. There are 100,000 people performing in a massive display of coordinated song, dance, and gymnastics. They practiced eight hours a day every day for a year. There's never a guarantee that Kim Jong-Il will be in attendance. Tonight, he is.

What's different this time is that Kim Jong-Il appears alongside his son. When the show is over, North Koreans in the audience applaud not for the performers but for their leader. Next up, a massive military parade billed as the country's largest ever. A show of firepower by one of the largest armies in the world. Kim Jong-Il said to be in frail health and rarely seen in public shows up again for the second time in two days, walking unaided but with one hand on the railing. She says long live the general and long live his son. Here Kim Jong-Il flashes a rare smile as his son jokes with elders. The crowd goes wild, jumping, clapping, even crying. Then as night falls, yet another spectacle. Tonight's is the third such event in 24 hours, and it is pure pageantry. Look at the colors, the choreography. Thousands of dancers in traditional dress. The media has been invited as guests. This is the invitation. Make no mistake, the real guests of honor are up there in the balcony. Kim Jong-Il and his son, the heir apparent, Kim Jong-Un.

JOERGEN MELSKENS, VISITOR FROM DENMARK: I think it was fantastic.

CHO: This man, an actor from Denmark, one of a handful of private citizens invited by the North Korean government, is among those watching.

What about all of the reports of oppression and the people starving and --

MELSKENS: I can't see it. Maybe it -- it is there, but I can't see it. I can just see lucky people.

CHO: This secretive nation will soon close its doors again, leaving many questions about its future. How will the young son rule? How long can North Korea continue as an isolationist state? The world watches. U.S. officials say this transfer of power is something they have been expected. This week of events, just another sign that the plan to keep the Kim family firmly in power is well under way.

Alina Cho, CNN, Pyongyang, North Korea.

(END VIDEOTAPE) BLITZER: It was supposed to be a hostage rescue, but U.S. forces trying to free a British aide worker from the Taliban may -- may have been responsible for her death.

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BLITZER: The Afghan president Hamid Karzai is confirming his government is holding unofficial talks with Taliban insurgents. He says he hopes those contacts will become official and more regular in the future. Mr. Karzai described the negotiations to CNN's Larry King in an interview will air tonight.

(BEGIN VIDEOTAPE)

LARRY KING, CNN HOST: The "Washington Post" is saying, Mr. President, that there are secret high-level talks over negotiations to end the war between your government and the Taliban already under way. How do you respond?

PRES. HAMID KARZAI, AFGHANISTAN: We have been talking to the Taliban as countryman to countryman talk in that manner. Not as a regular official contact with -- with the Taliban, but rather unofficial personal contacts have been going on for quite some time. Now that the peace council has come into existence, these talks will go on and will go on officially and more rigorously, I hope. There has also been the -- the peace and stability council that has been working under the chairman of the president that has been a part of talks as well.

But now official contact with a known entity that reports to a body of Taliban and that comes back to protest regularly, that hasn't happened yet, and we hope it can begin as soon as possible. But contacts, of course, have been there between various elements of the Afghani government at the level of community and at a political level.

(END VIDEOTAPE)

BLITZER: President Karzai also denied a report he's manic depressive. You can see the interview on LARRY KING LIVE, airs later tonight, 9:00 p.m. Eastern.